𝗙𝗿𝗼𝗺 𝗡𝗶𝗰𝗵𝗲 𝘁𝗼 𝗠𝗮𝗶𝗻𝘀𝘁𝗿𝗲𝗮𝗺: 𝗖𝗼𝗻𝘃𝗲𝗿𝘁𝗶𝗯𝗹𝗲 𝗕𝗼𝗻𝗱𝘀 𝗦𝘂𝗿𝗴𝗲 𝗮𝘀 𝗖𝗿𝗲𝗱𝗶𝘁 𝗖𝗼𝘀𝘁𝘀 𝗕𝗶𝘁𝗲
The last 12 months have seen a significant rise in convertible bond issuance. After a subdued period, 2023 saw a 77% jump in activity with total convertibles issuance reaching $48 billion. At Laz Partners we expect this upswing to hold the potential to influence hiring needs across our client base, and expertise in convertible bonds becoming an in-demand capability in the coming year.
𝗗𝗲𝗯𝘁 𝗥𝗲𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗻𝗴 𝗗𝗿𝗶𝘃𝗲𝘀 𝗖𝗼𝗻𝘃𝗲𝗿𝘁𝗶𝗯𝗹𝗲 𝗕𝗼𝗼𝗺
A key factor driving the convertibles resurgence is the approaching debt maturity wall. US IG companies face a record $1.26 trillion in refinancing needs over the next five years, while their junk-rated counterparts grapple with $1.87 trillion. Convertible bonds traditionally offer lower borrowing costs vs traditional bonds without immediate shareholder dilution through stock offerings. Car-sharing giant Uber exemplifies this, having secured a $1.5 billion convertible at a sub-1% interest rate in Q4 2023, significantly lower than the current 5.2% average for IG bonds.
𝗕𝗲𝘆𝗼𝗻𝗱 𝗧𝗿𝗮𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗨𝘀𝗲𝗿𝘀
Historically favoured by young tech & biotech companies, convertibles are now attracting established players across sectors, a shift that reflect the convertibles’ increasing appeal in a rising rates environment where even IG borrowers face higher borrowing costs. Utility giants PG&E and Evergy’s recent participation in the convertible market is another example of its widening reach.
𝗜𝗺𝗽𝗮𝗰𝘁 𝗼𝗻 𝗖𝗿𝗲𝗱𝗶𝘁 𝗛𝗶𝗿𝗶𝗻𝗴
This market shift translates to potential talent gaps to cover this expertise. Hiring managers will likely prioritize candidates with:
• 𝗗𝗲𝗲𝗽 𝘂𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝗼𝗳 𝗰𝗼𝗻𝘃𝗲𝗿𝘁𝗶𝗯𝗹𝗲 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝘀 𝗮𝗻𝗱 𝘃𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻: Expertise in analyzing conversion premiums, equity upside potential & credit protection mechanisms
• 𝗦𝘁𝗿𝗼𝗻𝗴 𝗿𝗲𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗻𝗴 𝗮𝗻𝗱 𝗿𝗲𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗶𝗻𝗴 𝘀𝗸𝗶𝗹𝗹𝘀: As companies optimize their debt portfolios, candidates adept at formulating refinancing strategies & incorporating convertibles will be highly sought-after
• 𝗕𝗿𝗼𝗮𝗱𝗲𝗿 𝗶𝗻𝗱𝘂𝘀𝘁𝗿𝘆/𝘀𝗲𝗰𝘁𝗼𝗿 𝗸𝗻𝗼𝘄𝗹𝗲𝗱𝗴𝗲: The expanding use of convertibles across sectors will mean a need for talent with sector knowledge beyond traditional tech & healthcare niches.
We expect the surge in convertible bonds not to be a short-term financial trend; it signals a shift within Credit with tangible implications for future talent needs.